Equity Office, founded by real estate mogul Sam Zell in 1976, has been the subject of buyout rumors for about 6 months, as private funds, including Blackstone have been snapping up publicly traded real estate investment trusts at a quickening clip.

The offer by Blackstone affiliate Blackstone Real Estate Partners of $48.50 per share in cash â an 8.5 percent premium to the stock's last closing price â values the equity of the company at nearly $19 billion, based on share data from the company's latest regulatory filing.

When including debt, the deal is valued at $36 billion, which tops the previous biggest leveraged buyout under this measure â the $33 billion buyout of hospital operator HCA Inc. <HCA.N> earlier this year. Excluding debt, the HCA deal was worth $21 billion.

Shares of Equity Office closed on Friday at $44.72 on the New York Stock Exchange. In June 2005, Zell told Reuters that Equity Office shares were undervalued, and the company was trading at only 80 percent of its net asset value â a measure of the property firm's portfolio value.

Equity Office said its board of trustees had approved the deal, which is expected to be completed in the first quarter of 2007. It said neither its management nor its trustees were part of the buying group.

"We believe that the skills and strengths of Equity Office will greatly enhance our existing office platform, which has been expanded through our recent acquisitions of CarrAmerica and Trizec," Jonathan Gray, senior managing director of The Blackstone Group, said in a news release.

Equity Office and Blackstone were not immediately available for comment.

DEAL SIZE RISES

Multi-billion dollar leveraged buyouts (LBOs) have become the norm recently as high liquidity in the global financial system has sent cash rushing into the private equity sector.